♪ >> we are recovering very quickly, but a lot of people aren't going to be back in the jobs market. >> people are comfortable coming back to work, but they are demanding more money to do it. >> the market is a little too complacent about the fed not even talking about talking about tapering. >> it is hard for the fed to maintain the degree of accommodation when the output gap is closing fairly rapidly. >> >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. lisa: the pendulum of a summer stasis.

good morning. tom keene, get jonathan ferro, lisa abramowicz. jonathan ferro out today. romaine bostick in. we very much appreciate it. the longer you give markets right now, the more they went to go up, even if there is news to push them down. that is what we are seeing this morning. tom: the friday gloom was covered by being right near record highs. the gloom crew is begging for the markets to go down. i'm sorry, the bid is there. is that their everyday? no, but it is there pretty much. lisa: even as you see the momentum heading into the close, it seems to be up as well. i am wondering what the participation is like. in other words, who you have a sense of that is driving this trade. tom: a lot of them -- romaine: a lot of them had moved to the sideline with that volatility. you saw the volume start to pick back up and a bid come back into

some of the more traditional growth and momentum names rather than the more speculative names. that is why sprite a -- why friday, you did to the s&p 500 above that all-time high. that was driven by microsoft, apple, and the more traditional growth and value names. lisa: i think a lot of this is underpinned by the treasury market. inflation very much front and center, and the idea that we have some sort of stability that seems to be consensus that seems to underpin the smelt up kind of feeling. nothing has changed. tom: it is a multi--- a mel top, but a sort of kind of mel top -- it is a melt up, but i sort of kind of melt up. yields should be 1.60 percent, 1.65%, some people talking to percent, and we are at 1.5772%. lisa: and if you look at the

real yield, it is basically the same, too. it really raises the question of if you do get paper talk, what does that do to you? do you end up with lower yields? romaine: the expert on this -- tom: the expert on this is romaine bostick, infra jonathan ferro. -- in for jonathan ferro. look at the vix, just extraordinary, 21.18. then we grind down and right now, 15.79 on the vix. that is a while statistic -- that is a wow statistic. romaine: when you pair that with the dollar, the re-embracing treasuries, and folded over with the fact that you still have an equity market, at least at the top line, that is right around record highs, what does that tell you? i think it tells you this becomes a story about duration not only of investments, but duration of the timeline of when

spokes -- when folks might think the fed pushes deep into 2023 before you see some meaningful moves. tom: yen showing some strength, 1.09. chris verrone published a moments ago with strategas, and he says the ex-us opportunity set continues to grow. he is on the same page as the good david rally, chief investment strategist of bluebay asset management. you distill it all, david riley, and use aem debt is of acute interest. why? david: i think in an environment where we have been export nearly low yields in developed markets, you have been just talking about negative yield on u.s. treasuries. i think it is natural to look

where you are getting not only a higher yield, but where you have premiums which are going to provide you with some sort of buffer again and a pickup in volatility. if you believe as i do that we are going to move into a somewhat higher were inflation regime than the low reflation -- the low inflation regime that has dominated over the last decade or so, is coming to an end. commodities and emergencies do relatively well anymore inflationary environment. i think it is looking like quite an attractive asset class. lisa: although it has to hit the sweet spot. too high inflation, could be bad for these developing markets. so how do you determine whether we are heading towards a more dangerous spot of inflation or whether we continue to be

funding that golding lots -- finding that goldilocks zone. lisa: it actually is quite a -- david: it actually is quite a fine line. if we are moving into an environment where inflation is, particularly in the u.s., in the range of 2% to 4% next year and beyond, that is actually the environment where, as you suggest, that goldilocks fits into some degree. if we get a more serious and sustained growth which forces the hand of the fed to be much more aggressive, normally in terms of tapering its qe, but where else are you going to get rates. you got increased gross risk as well, and i really hope the

growth markets would be a part of that. so you really have to make those dutchman's inside your per polio construction. romaine: in past economic and monetary policy cycles, we tended to see a lot of central banks follow the fed. they would wait for the fed qs. this time around we are not seeing that. we are seeing a lot of banks start to move forward with some sort of normalization or at least her to talk about it in the way we haven't yet. why? david: it is a good point. i think the reason we are seeing that is because some of the central banks within bank of canada, the reserve bank of new zealand are starting to sort of say and evening lead to size sent -- starting to say, and even england to some extent, that it is time to think about scaling back the degree of accommodation, even if it is not

upright climbing. one of the reasons we are not seeing that from the fed is because the fed has changed its monetary policy regime. i think it is going to be very hard by any central bank to be more dovish than the fed is. that's one of the challenges facing the ecb even though europe is in a less good likes than the u.s. is in because we have seen this dollar weakness over recent weeks. tom: is dividend growth and use of cash for dividend growth a yield alternative right now, given where real yields are? what david: we know is that dividends aren't as reliable -- david: what we know is that dividends aren't as reliable as coupons. they do get switched off or if

you have to factor that into the analysis that you are doing. i think it is the case that it still makes sense to have as part of your portfolio clearly some fixed income because it is some significant bandwidth to the overall portfolio, but where you are looking also to generate some additional income, you have to kind of off benchmark, if you like. that would include emerging market debt, things like leverage loans, collateralized loan obligations, where you're getting a yield pickup. you've got ready literally little -- you've got relatively little embedded in the instrument. lisa: it sounds like you are very optimistic that the global scenario, and gets recently you have been reducing risk on the margins in your portfolio. where and why? david: i am optimistic bout the outlook for the global recovery.

the global reflation story. that's why we still have this bias across the strategies at bluebay, but we have brought down some of the risks, and really we have done that because of valuation, not because we have concerns about the fundamental outlook. it's because a lot of the good news that we are expecting is already in the price. you can see that for example when you look at generic credit spreads. the symmetry or asymmetry around it is we get a bout of volatility and uncertainty around the fed if we get an inflation print on thursday is such that it makes sense to dial down the amount in portfolios. tom: david, thank you so much. david riley of bluebay asset management, their chief investment strategist. to me, it is so shocking where real yields are. we heard that focus with an earlier guest on the five-year real yield.

lisa: we have kind of seen an unwind of inflation expectations. we had a huge surge up, and then this unwind which has led stability to the markets, saying we will not necessarily see destabilizing inflation. come used to have egg thinkers coming out -- not necessarily see debility stabilizing -- see destabilizing inflation. romaine: frankly, they aren't a whole lot higher than what the fed target is right now, and it really hasn't moved determined this amount over the past few weeks. i think the general consensus is that people are buying into the fed's message that a good portion of this, not all of it, is going to be transitory. the key thing to watch from a lot of strategist's wage

inflation. that is the sticky one. if that ends up going higher, you could see it have some effects. tom: we had a 15 handle on vix moments ago. stay with us. on apple, must watch, must listen, next. ♪ ritika: u.s. treasury secretary janet yellen's has higher interest rates would be a plus for the u.s. and the federal reserve. in an interview with bloomberg news, president biden -- she said president biden should push ahead with his $4 trillion spending lan even if they trigger inflation. she says any spur in prices will fade away next year. some of the last biggest tech companies are welcoming the g7 agreement on a minimum corporate tax rate of 15%. facebook says it is the first step towards certainty for businesses. the degree -- the agreement may

not be implanted for years. google will pay $268 million to settle an antitrust investigation and france and has agreed to change the way its business works across the world. they used dominance over ad sales -- the eu says they used dominance over ad sales and the app store to influence the market. by stem group has agreed to by data center operatorqts, represented to anyone percent premium to their closing price on friday. macquarie infrastructure -- mccrory infrastructure -- macquarie enter structure -- mopar and for structure has agreed to buy kkr.

i ritika gupta. this is bloomberg. ♪ this is bloomberg. ♪

♪ >> in the relationship in trade that's been marked by significant in balance, i would

say there are parts of this trade relationship that are unhealthy and have over time been damaging in some very important ways to the u.s. economy. tom: the u.s. trade representative there, moving the dialogue forward. we welcome all of you to "bloomberg surveillance." massive correction in order right now. i was back 20, 30 years with yuri and temer. we must correct the new fidelity manse up by the gillette factory . thank you for commenting. it is farther from fenway park. that's all you've got to know. lisa: serious correction this morning. tom: romaine bostick, thrilled you are with us this morning. jon ferro is off. right now on apple, and a controversial call, pierre

ferragu is at state street research. a lot of people are more optimistic. you really push against the optimism on apple. why? pierre: it is really the question of the flipside of apple's success in the last 20 months. the company is on its way to shift to 100 wonde -- to $130 million this year. most consumers have been stuck at home, not traveling, not going much to restaurants. so consumers have been spending a lot of money on high-end consumer electronics, and this has been heightened

significantly. what we keep in mind is it is happily displaying on a fairly closed garden. there are so many users, so when you have 230 million of them eyeing your new phone in the last year, that creates anticipation in the market for next year. we anticipate that the next nine of 12 is probably going to be not as innovative as the previous one, and then you have multiple in the market with the new iphone, and people will be going back and restaurants, so the commendation calls for a very weak year for the iphone from the fall of 22 anyone -- for the fall of 2021. tom: how does the plan change the refresh rate dynamics?

the idea that you are not putting $600, seven hundred dollars, $800 up for a phone come but you put up for some sort of monthly plan. how does that change the guesstimate towards an apple call kailey: -- apple call? pierre: that's a very good question. i think a significant portion of the market is going to be triggered by -- at the same time, what you see is in the mindset of you don't really have plans because it is a very small marty that replaces their phone every year. when that happens, when you see a lot of consumers spending on

electronics, -- electronics, 15% to 20% will take that opportunity to change to a better plan. but i the end of the day, most iphones are still sold independently for my plan. lisa: what you're calling for a somewhat radical considering the importance of apple to so many portfolios. the idea of a 28% downdraft in the shares. i wonder what you see the past adding their given the incredible ownership and appetite for companies that have pricing power and incredible cash flow. reporter: -- pierre: yes, it is a very good question. i think you see that we we are

still in uncertain times, so when you start having negative news flow about it, you might be marginal, but prices move when there is a change in balance between marginal supply. if you stop hearing more and more news flow -- you start hearing more and more news flow that apple is not going to have a good year, you feel that we move slightly wait -- slight weight or equal weight, and if

they see decline potential, they will probably stay on the sideline and wait. and then of course, people buying to come in. these two have a lot of money, so the potential in such a large cap, you could expect to see money taking positions from that. romaine: any possibility for a pivot or real innovation here? you're talking about 14 years since the iphone 11, since the ipad. very quickly, what's next? -- you're talking for years

since the iphone 11, since the ipad. very quickly, what's next? pierre: while the set up that makes possible augmented reality , coming out with a headset and glasses was more and more divisive a position over that two to three year horizon. of course, i think that is a demonstration of what they have to offer which is still very openhanded. tom: we will leave it there. p are fara goo, it is fasten it -- pierre ferragu, it is fascinating. lisa, what will you look for from apple today? lisa: whether they have a new

product that could cause the keen household to sell out on a new imac. tom: mabel they will have a new chip today, seriously. lisa: that would be huge, if they were manufacturing their own ship. tom: stay with us. bloomberg radio, on television.

tom: good morning, bloomberg surveillance. jonathan ferro, lisa abramowicz, and tom keene. mr. ferro is off and romaine bostick is holding court with us. an important report on work from home in about 15 minutes. right now and with great insight, neil dutta joins us. green on the screen. futures up fractionally. 16.86 on the vicks. neil dutta tears apart what we learned about the labor market friday and driving forward -- what did you do to your x axis off the jobs report. how long until we see tangible

labor recovery? neil: a great question. it is coming slower than i would have hoped. obviously we got a head fake with the strong adp numbers heading into the friday jobs report. i think over the summer we should begin to see stronger employment growth. the issue right now is not demand. we know job openings are quite high. we will get more evidence of that later this week. the issue is one of supply. labor force participation rates have not moved since last summer. during that time job openings have grown by 2 million. this is primarily an issue of supply. there are issues around why that may be the case. covid is still an issue. you had as many people saying they had a job but were not working because of illness as you did in march. despite this drop in cases,

covid remains an issue. i think childcare is probably an issue. i think the unemployment insurance issue, which is the most contentious of all of these things come is probably an issue . we will get a test case over the summer. if jobless benefits, supplemental unemployment insurance goes away, that should prompt more people to attach to work. tom: new york times was very good, very thought-provoking about the idea of between demand and supply of labor, just raise the wage. will the rages of wages be demand pull or cost push? neil: it is not that -- that is fine. are we going to celebrate this boom in low-wage wages? obviously this was all happening before the pandemic. we were talking about leisure and hospitality workers getting

a lot more. wasn't that a much better outcome for the economy? i think it is premature to be celebrating this. if restaurants will give out bonuses to workers to join, that does not stop was also taking bonuses. does anyone believe -- i do not they go be the best thing -- that is the industry sing the highest rate of wage growth but also the biggest shortfall in employment relative to the pre-pandemic level. lisa: there is a controversial issue about whether higher wages and how that feeds back into the

economy. there is a question about how much restrictions are going to slow growth over the longer-term. at what point does the incredible demand for workers paired with the lack of supply lead to a slower growth scenario than you would otherwise see? neil: piercing that play already in the short run. -- you are seeing that play out already in the short run. look at auto sales. you cannot buy would you cannot sell. it is already starting to bite. service sector consumption is continuing to accelerate. we are talking about restaurants , it is important to note that dining out is still growing at a solid pace. that is offsetting some of the slow down in the goods industries. supply is binding in the short run. it does not respond as quickly

as demand does. you're beginning to see that. the question is are these issues going to get better or worse over the next three to six months? i think it will get better? covid is the first issue. we know that will get better over the summer. cases will continue to decline. that should make people more comfortable about taking work, especially those sorts of jobs that require face-to-face contact with people. schools are going to reopen. in new york, where i live, they have said it is going to be a full in person instruction. that has to help the labor situation. lisa: and we are all excited. i am telling you as somebody who lives in new york with children, we are excited to get them back to in person learning. there is a question going back to your point about wage inflation and the friction. we do not know how long-lasting it will be. bank of america put out research

showing wage inflation was back to 2001 levels when you look at durable manufacturers in the amount of jobs they had available versus workers they could rehire. at what point do you take note of that, could we see wage inflation lead to slower growth and cause you to materially change your outlook? neil: you are seeing it in certain sectors. the issue is is this a permanent state for the labor market or is it temporary? i would argue it is temporary because the supply shortage in the labor market is temporary. these headlines you are seeing about restaurants or fast food dining handing out iphones to teenagers for them to work, or even what you are citing in the durable goods sector, that is not a permanent state of affairs. what we are seeing in the labor market is largely temporary in nature, which means the constraints you are seeing, these things you are pointing out, will also be temporary.

romaine: let's assume this does end up being temporary. you have to believe the fed tightening is still far afield. you still buy to that general thesis, dubai into what powell has been telling -- do you by into what powell is telling the market? neil: i do. the fed's policy is to let the economy run hotter than any of us have ever seen at any point in our career. it is their policy to be somewhat irresponsible. to me that means that against traditional benchmarks they will look like they are going a lot later than they otherwise would. it probably means once they start they will go a lot more rapidly. i think they wait a lot longer than they had been in the past. a lot of people are talking about the jackson hole period being a set up for tapering and all of this. i do not know. i know that is the consensus.

they have made some progress, but have they made substantial further progress? that still feels a ways off. they are defining this not just in demand terms but supply terms. are they going to start thinking about stepping to the exit door with the labor force participation rate basically unchanged since last summer? it is almost 2% below where it was before the pandemic. we know that before the pandemic, the fed was buying into the idea that their policy, letting the cyclical recovery and sue -- recovery ensue would help the supply side -- why would they signal some kind of an exit with the labor force partitioned nation rate -- the labor force participation rate? that is the risk.

they have a policy where they are not just looking at demand-side issues but they are looking at supply-side issues. that can get interesting from a future inflation perspective. i do not think these are issues right now but you can see this playing out. romaine: there is still risk in the messaging as well. whatever weight we are putting on jackson hole come the idea is jay powell has to get everybody on board for actual action. i wonder if the message is consistent with what the market is willing to accept? neil: this goes back to the cacophony of fed speak. i generally think he has the board of governors on board with his strategy. the hawkish folks are generally regional fed presidents that do not have much bearing on what

the actual policy is going to be. tom: neil dutta, thank you so much. really brilliant on the supply and demand dynamics of the american labor economy. what do i make of this? i got a lift in the market. what is the why? romaine: i have no idea what the why is. you're talking about a 10th of a percent. tom: role with us. it is the morning. romaine: maybe it is jeff bezos going to space, that is the catalyst. the bid that has come into the market is persistent. it may not be remarkable, but there has been a persistent bid to the upside for last few days and that appears to be continuing. we will come up with a narrative. tom: i've not even brought up my meme stock. amc, 49, up a dollar. what we make of that? lisa: we go to cash. i am kidding.

i think the fact we see a return to the meme stocks highlights how we have seen some of the frothy are areas of the market regained steam. the narrative i would give his we saw an unwind of the inflation narrative. now we have this belief in the fed that the fed will get what they want despite naysayers. the question is will that last? coming up we will talk about much of that. wells fargo head of credit strategy will join us. we'll talk about the fed and their holding of atf. i personally find this fascinating. the idea that if you have space, the central bank has your back. what does that mean in terms of your willingness to take on risk? tom: the 10-year gilts 1.57%. 1.56 would be remarkable -- the 10 year yield 1.57%. tom: we have a superb moment

coming up with nicholas bloom of stanford. for any of you considering the new work, this is a much watch -- a must watch, must listen. this is bloomberg. good morning. ritika: u.s. treasury secretary janet yellen says president biden should go ahead with his spending plan, even if they lead to more inflation and higher interest rates. janet yellen told bloomberg news higher rates would be a plus for society and the federal reserve. she says any spur in prices resulting from the rescue package will fade away next year. in mexico, the president's party took the lead in midterm elections for the lower house of congress but a survey indicates his coalition will not retain a supermajority needed to pass institutional reforms. the presidential runoff is still too close to call. the investor favored trails the leftist.

new york or dropped after hitting $70 a barrel. vaccination rates accelerate, driving greater mobility. oil prices are up more than 40% this year. shares of tesla are lower premarket. the electric car maker called off plans to build a model escalate plus, a longer end version of its high-end. elon musk says the play plus will be canceled because the play version is so good. the world's richest person is going into space. jeff bezos will be one of the passengers next month when his company blew origins since human into space for the first time. the suborbital flight is set for july 20, 15 days after he is had to resign as ceo of amazon. global news 24 hours a day, on air and on quicktake by bloomberg,

powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> we still have to remember that the economic hit to the economy last march, april, and

make, were devastating in a lot of ways. we cannot just flip a switch but is this a positive report? i would love to be able to stand here and say 7 million jobs came back that is not how the economy works and how the system works. tom: the secretary spirited after the economy report. it will be interesting to see if we get a number of improvements in the report on the total change from the biden administration. this conversation has been hugely anticipated and it does so because nicholas bloom as a young student many years ago was at the absolute forefront of labor dynamics, innovation, and technology. he did this with someone who has been such help to bloomberg on the economy and bloomberg surveillance. we are thrilled nicholas bloom can join us from stanford. congratulations on your january 2021 paper, which is the

discussion point on work from home. i want to go back to 2009. what has changed is the technology has changed. is the new technology the reason work from home will work? nicholas: it has been an odd journey. i've been working on working from home since 2004. that is almost 20 years. march 2020, it went wild. it has changed a lot. my experience of working on working from home, the last 10 years have been different because we got the two final critical pieces. we have video calls. we have zoom in teams over the internet, and we have dropbox and clout so you can share files. if you go back 20 or 30 years, i

talk to people who did working from home in the 1980's and 1990's, it was terrible. telephone calls and dropping off piles of paper at the front door. if the pandemic had happened in 1980, we would've been in real trouble. i'm not sure the lockdown -- thankfully we had the ability to flip two thirds of the economy in march 2022 working from home. it worked pretty well. it looks like a lot of that is here to stay. tom: is there a permanence to it? you did the paper in 2009. marissa mayer change the world at yahoo! in 2012, there was a glade debate about yahoo! work from home. drive that home to where nicholas bloom and marissa mayer can say there is permanence to work from home, or like marissa mayer people would say let's get into the office. which is it? nicholas: i spoke to marissa mayer recently about this. what she did is exactly right

but history has forgotten what she did. marissa mayer discovered there were people working from home full-time and some of them were working so poorly they would never set up their computer for more than a week at a time. she said you will have to come in three days a week. you cannot work from home full-time. huge numbers of firms rolling out exactly this plan. apple and google -- apple and google and microsoft, the world is dropping that plan. post-pandemic they will come and from three days in the office, and we will manage you. we will make sure you are doing your job and will continue that indefinitely. romaine: that gets to the idea about productivity and the

perception of productivity. a lot of companies want to look over your shoulder and know you're doing the work you are supposed to be doing. what is your data showing about the level of productivity during the covid crisis? nicholas: quite surprisingly, working from home appears to be more productive than being in the office. that is based on survey responses and a few individual firms. my concern is that will not last forever. we will end the pandemic with this talk of social capital. being in the office for years together, working together. i did not think that can last forever, working from home five days a week. three days in the office social, meetings with your team events and your client events two days a week quietly working.

that maximizes productivity and employees love working from home hybrid. this is why this plan has been so universal. firms are more productive and we as employees are happy. romaine: what about career advancement? the criticism is you need facetime. if i want to move up, i need to be face-to-face with tom keene every day so he does not forget i exist. nicholas: the thing i've spoken quite vocally on his career advancement is fine as long as you're coming in the same number of days as the people you will be competing against. if i'm in a team of 10 people and i'm at home full-time and the rest of them are coming in three days a week, i imagine i will get left behind. as long as the whole team comes in three days and stays at home on the other two, things are

good. you're compared with people doing the same type of work. no one is getting ahead with the bosses. the big problem is firms would be going with the choice plan where they say as long as you are doing your job, you can choose the number of days you come in. you can imagine that down the road will be very problematic. some people come in one day a week, some come in five, those that come in five will be promoted and move ahead. tom: thank you for an early morning at palo alto. i cannot say enough about his january research on this raging debate of work from home. can we do surveillance work from home? romaine: we can give it a try. tom: we did give it a try. it is better in the office. romaine: i remember that. it is better for folks like us. to nicholas's research, he makes some great points, and unwillingly about the productivity site -- not only about the productivity side but on the worklife balance.

there are tangible billets -- tangible benefits to having that flexibility. tom: i will stay out of the debate, but it is a huge debate. for those of you across this nation, particularly if you're not in a job economy where you can work from home in the work from home space, to me there is no topic. romaine: absolutely. this applies to very pull approached -- to a very privileged class of folks. tom: that is worth stating. a nod to the economic policy institute for some of their work on that. i also nod to green on the screen, futures advanced four, big move off of where we were three hours ago. the vix 16.80 in this bull market. apple has a big announcement. i am interested in the chip technology. the m1 x, whatever it is, that

is what leads the way. romaine bostick and the rest of our afternoon group with apple discussion this afternoon. on "balance of power" the former citigroup vice chairman and new york city mayoral candidate. ♪

lisa: 30 minutes until the open. leading higher. cannot keep a good market down.

i am lisa abramowicz in for jonathan ferro. "the countdown to the open" starts now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ lisa: investors balancing stimulus optimism amid rising rates and inflation concerns. >> the u.s. has been a bit confusing. you've got janet yellen saying may be a rise in interest rates would be a good thing. >> spilling over the side. >> still awash with excess liquidity. >> the fed is putting so much liquidity into the system. >> the fed was pumping money into the system. >> fiscal stimulus and monetary stimulus is still the